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Marten's Earnings Are Confirming A Trend: The Slowdown In 4Q Wasn't That Slow After All

If there was a significant freight market slowdown in the fourth quarter, there haven't been too many signs of it in any earnings reports that have been issued so far.

The report released Thursday by Marten Transport, Ltd (NASDAQ: MRTN) is the latest truckload carrier that is putting out mostly strong numbers for the fourth quarter of 2018, a period that was the subject of repeated rumors and whispers that things weren't that good, of a peak season that started late or didn't come at all.

There have been a few down arrows. For example, although Marten as a whole boasted of record operating income and operating revenue for the quarter, its truckload division was softer than in the fourth quarter of 2017. Operating revenue for Marten's truckload segment was $81 million net of fuel compared to $85.5 million in the fourth quarter of 2017. But there were positive operating statistics as well. For example, revenue per truck per week in the fourth quarter was $3,941 compared to $3,700 in 2017's fourth quarter. That number was down slightly from the third quarter. Marten's truckload division also drove fewer miles than both the fourth quarter of 2017 and the third quarter of 2018.

But operating revenue net of fuel – $81 million – was slightly higher than the third quarter of 2018, which recorded $80.5 million in revenue; the slowdown that had been discussed was not that it was slower than 2017, but slower in the fourth quarter of 2018 than the third quarter. Marten's operating revenue doesn't indicate that.

Operating income in the third quarter 2018 for the truckload sector was just over $10 million while it was $9.5 million in the fourth quarter of 2018. But the fourth quarter 2018 figure easily outdistanced that of fourth quarter 2017, when operating income stood at $7 million.

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The truckload division's operating ratio (OR) was 89.9 percent for the fourth quarter, compared to 92.8 percent for the fourth quarter of 2017. The third quarter 2018's truckload OR was only slightly better than that of the fourth quarter, coming in at 89.3 percent. (For full year 2018, Marten's truckload division posted an OR of 90.7 percent, a significant improvement from the 93.1 percent posted in 2017.)

Truckload at Marten did have a significant falloff in miles traveled, declining to 36,171 from 43,624 in the fourth quarter of last year. (By contrast, its dedicated division, which had a strong quarter, saw an increase in miles driven to 24,025 from 19,461.)

In its release, Marten said the full-company operating income and operating revenue were the highest for any quarter in its history, and the full-year figures also could make that claim.

In the quarter that many had anticipated as showing that the freight market had peaked earlier in the year, those signs have yet to emerge. All the railroads that have released their earnings reported strong quarters. Heartland Express posted an increase in OR of more than 1,000 basis points. P.A.M. Transportation Services, Inc. (NASDAQ: PTSI) reported an OR of 85.8 percent and an improvement in revenue per mile to $1.74 from $1.44 in the fourth quarter of 2017. (P.A.M. also reported that its quarterly and annual operating results were records.)

Or as Covenant Transportation Group, Inc. (NASDAQ: CVTI) CEO David Parker said on his company's earnings call Wednesday, "Freight is not bad. I'm happy about the freight environment, and we're bringing on new freight, we're getting rate increases and I'm still a pretty happy camper."

One other notable point in the Marten earnings: it put a large amount of cash on its balance sheet over the year. It ended the year with $56.8 million in cash after starting the year at $15.8 million, more than tripling that figure. Marten CEO Randolph Marten specifically cited the growth in the cash stockpile in reviewing the company's financial position, something that isn't touted frequently in earnings reports. A strong cash position makes acquisitions easier because the funding is already there; too much cash not deployed efficiently for growth can often make a company a takeover target itself.